Assignment:
The number of bankruptcies skyrocketed during the Great Recession, especially since so much of it was based on building house equity and no-doc loans.
Several in the industry are predicting another jump in the next few years from a combination of medical costs becoming prohibitive and people not being able to keep up with their medical bills, and from a realization that student loans cannot be dischargeable in bankruptcy court except in very rare circumstances (a pre-med student has $60K in student loan debt and joins the Army to help pay for the cost. He then suffers a head injury that will prevent him from ever working in the medical field. The debts can be discharged for undue hardship, but it is very rare.).
In 1997, the Bankruptcy Code changed, making it more difficult for debtors to discharge credit card debt. Many blamed the high powered bank lobbyists for these changes. What do you see coming for the bankruptcy laws in the future?
The article Just the Facts: Consumer Bankruptcy Filings, 2006-2017, states that between 2005 and 2017, about 12.8 million consumer bankruptcy petitions were filed in the federal courts. Of that 68 % were filed under and 32% were filed under. These numbers speak by themselves, proving that bankruptcy proceedings are seen with a lot of frequency in USA courts. Definitely, this is one of the reasons, of why it's important to have at least a basic understanding of the Bankruptcy Code and more specifically when a debt it's dischargeable and when not.
In the case presented The Warners filed for bankruptcy under order to get the debt discharge, which means that the court will relieve the debtor (the Warners) from the obligation to repay the debt, in this case the remaining S100,000 and prevent the creditors (The Archers) from collecting the same debt. The arguments that would support that the debt can be discharge are the following:
1. Liquidation bankruptcy is the simplest type of bankruptcy and applies to most debtors. Actually, more than 99% of these proceedings ended with the debt discharged.
2. The Warners could argue that they had the intention to pay off the debt, since they already paid $200,000 but unfortunately, they don't have how to pay the remaining $100,000. Fay's article The Warners should be able to demonstrate:
(a ) The debt is more than half of their annual income
(b) It would take them more than 5 years to pay off their debt.
(c) Must earn less than the state media income or monthly basis
(d) Agree to submit their financial records as well as and unsecured debts. In order to prove that, as per Bill
On the other hand, the arguments that will place the court in favor of the Archers, by not discharging the debt are:
• "Discharge it's a privilege, not a right". (Armstrong, 2018) Which means that is not enough to file a petition, because not everyone has the right to being released from this liability or which is the same, not all debts are dischargeable.
• For a debtor being able to get a discharge, it is forbidden to defraud the creditor before he filed bankruptcy. (Armstrong, 2018). Which was exactly what happened in this case. The Warners originally committed fraud and that was the reason for the debt. It's worthy to mention that delinquent and fraudulent activities go against the primary purpose of bankruptcy, which it's to discharge certain debts and give to an honest individual or corporation a fresh start.